It should come as no surprise that Guernsey is so much in demand as a domicile for a broad range of alternative investment funds, including private equity, property and hedge funds, as well as a residual core of traditional long-only retail funds. Over the years, one of the most important characteristics demonstrated by the island's funds industry is its flexibility.

That was first demonstrated more than a decade ago when the implementation of the European Union's Ucits legislation made the Channel Islands less attractive, at least to the European market, as domiciles for retail fund vehicles.

Although this did not end Guernsey's role as a domicile for long-only funds, one that could yet receive a fresh impetus from changes in the international regulatory environment, it did require the island's funds industry to examine new directions and opportunities, initially leading to the introduction of traditional long-only specialist funds as B schemes, and more recently demonstrated by a reappraisal that coincided serendipitously with the rise to prominence of the alternative investment industry.

The range of funds serviced in Guernsey, domiciled both on the island and in other jurisdictions, is matched by the breadth of its skill base. This is now paying dividends, as is demonstrated by last year's increase of more than one third in the total volume of assets under administration in Guernsey. While the establishment of the Qualifying Investor Fund regime undoubtedly boosted hedge fund inflows, the overall total also benefited from vigorous growth in the island's wellestablished property and private equity business - and from continued expansion in the servicing of non-Guernsey funds.

What the QIF regime has successfully done is to counter any misconception that Guernsey is purely a centre for funds of hedge funds, important though this business is to the island. Last year's changes to fund regulations have also reinforced the jurisdiction's reputation as a good place to do business by underlining its capacity for innovation and self-renewal.

The QIF regime is part of a long Guernsey tradition of trail-blazing in the international financial services sector that included the invention of the Protected Cell Company concept more than a decade ago. The PCC, which among other advantages allows a single corporate structure to contain multiple units or cells that are not legally affected by each other's insolvency or liquidation, has since been copied by jurisdictions around the world.

The PCC offers cost benefits for a variety of purposes in the financial industry. Until a recent change in the law its use was restricted to the funds sector, where it offers a structure well suited to the umbrella fund concept, as well as to the insurance sector, where it is commonly used for captive insurers and reinsurers set up for smaller companies. The uses PCCs can be put to have now been broadened, and Guernsey will shortly also have an Incorporated Cell Company vehicle.

As with every leading international financial services jurisdiction, Guernsey is constantly examining ways to add the greatest possible value within the constraints of a small island. The high level of expertise and flexibility of the industry's workforce has proved vital by enabling limited resources to be deployed to best advantage.

The growing number of experts both in the private equity field and in the hedge fund sector is set to benefit the island as the alternative asset management business evolves in the future, since many of these skills are easily transferable into different types of administration.